Fuel prices might be reviewed upwards in order to address biting “artificial shortages” of the commodity on the local market, Energy and Power Development Minister Fortune Chasi has hinted.
In an interview with Zimbabwe Television Network (ZTN) on Friday, the Minister said the current price is heavily subsidised and not market-led.
“In the past few weeks, fuel (prices) had gone down considerably and there was fuel dumping but we knew that it wasn’t long-lasting. We will take the necessary measures to correct the situation,” he said.
Speaking to The Sunday Mail last night, he said some petroleum producers were arguing that fuel prices were supposed to correspond with the price of bread.
“I have been away but these discussions have been going on. Some are equating it to the price of bread and so forth. But let me talk to Mazambani (Eddington, the acting Zera chief executive) and get back to you,” he said.
However, attempts to get a detailed comment were unsuccessful by the time of going to print. Zimbabwe’s fuel is considered the cheapest in Southern Africa.
Motorists are currently paying $28,96 per litre of petrol, while diesel is retailing at $24,93 per litre.
In US dollar terms, at parallel market rates, this is equivalent to US0,37c and US0,32c, respectively.
South African motorists have to fork out US78 cents for a litre of both petrol and diesel, while Zambia sells a litre of petrol for US0,96c and diesel goes for US0,85c per litre.
In Mozambique, petrol trades at US0,92c per litre, while diesel is pegged at US0,86c. Fuel shortages have worsened in recent weeks.
Although motorists have been queuing for the product, petrol and diesel availability remained constrained mainly due to unsustainably low prices, foreign currency shortages and arbitrage.
Fuel stocks are available to last the country a month but can only be released by local and international traders once they are paid for.
Figures obtained from the National Oil Company of Zimbabwe (NOIC) yesterday showed that for the first nine days of June, fuel retailers accessed 10 million less litres than the national requirement.
Commenting on the shortages, economist Professor Gift Mugano said they could be traced to the pricing system. He said there was need for a market-led regime so that fuel could be available and plug black market activities where speculators are hoarding the product.
“If there are price distortions, it results in rent-seeking behaviour where fuel is diverted to the parallel market. The product must be priced correctly because there is no need for subsidised fuel,” said Prof Mugano.
He recommended slashing of the import bill by increasing local production of cereals, fruits and vegetables, fertiliser and chewing gum, which are bought mostly from South Africa at a cost of US$2,3 billion.
Local production will then create space for using foreign currency to buy fuel.
Financial analyst Mr George Nhepera said the price of fuel should be revised upwards to meet the laws of demand and supply. Currently, there is increased demand for fuel but the supply is low while prices have remained static, thereby negatively affecting availability.
Said Mr Nhepera: “The solution to getting rid of current distorted prices of fuel in local currency lies in solving our current challenges of high inflation, unstable exchange rate and improving foreign currency export revenues.
“The intention by the Reserve Bank of Zimbabwe (RBZ) to go back to a market-determined exchange rate could be a right decision to adopt, which once implemented will lead to determination of the real optimum price levels. Once this has been done, people will either buy fuel priced in foreign currency or local currency.” Confederation of Zimbabwe Industries (CZI) president Mr Henry Ruzvidzo said: “The price paid by industry and commerce in business disruption far outweighs the benefit of cheaper fuel. The sector can benefit from liberalisation because the obtaining situation where two weeks can pass with very little fuel available at the pumps is costly to the economy. The fixed currency exchange rate makes the fuel price unrealistic and pushes up demand and arbitrage.”
The Indigenous Petroleum Association of Zimbabwe has been urging Government to liberalise the oil sector to allow players to determine the price of fuel and ensure product availability.
Mr Nhepera added that there was an urgent need to arrest inflation to single-digit level through creating more confidence in the economy by engaging more technical expertise and experience in addressing other economic issues which force prices to continue rising.
“Another problem that we have in this country, which many policymakers could be blind to, is that we have a two local currency system, which is the Zimbabwe dollar and RTGS or mobile money.
“Government has no choice but to put in place credible policies that ultimately result in a single local currency system of the same value whether the money is expressed in notes and coin or in RTGS or mobile money. This is what is commonly found in many monetary systems of the world, hence we should do our best to normalise this situation,” he said.